In response to the Financial Accounting Standards Board's recent proposal on the Hierarchy of GAAP, the American Institute of CPAs has issued an exposure draft introducing a proposed Statement on Auditing Standards that would apply only to nongovernmental entities.

The draft, available online at, introduces a proposed amendment to Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, for Nongovernmental Entities.

The FASB proposal moves responsibility for the GAAP hierarchy for nongovernmental entities from the auditing literature (SAS No. 69) to the accounting literature. The GAAP hierarchy had been criticized for being directed at auditors rather than at the reporting entity, which is responsible for selecting accounting principles.

Though the FASB proposal makes no substantive changes to the GAAP hierarchy existing in SAS No. 69, the AICPA noted that the FASB may change the GAAP hierarchy in the future. The institute notes that the FASB has projects underway that would reduce the number of levels of accounting literature under the GAAP hierarchy to just two -- authoritative and non-authoritative, and that would address the role of the FASB Concepts Statements in the GAAP hierarchy.

The proposed SAS deletes the GAAP hierarchy for nongovernmental entities from SAS No. 69. The exposure draft lists the sources of established accounting principles in the United States that are generally accepted for governmental entities.

The AICPA's Auditing Standards Board decided to coordinate the provisions and effective date of the exposure draft with the FASB proposed statement.

The comment period for the AICPA exposure draft ends on June 27. Responses should be sent to Sherry Boothe, Audit and Attest Standards, AICPA, 1211 Avenue of the Americas, New York, NY 10036-8775 or to

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